Mutual Funds and ETFs

You want to invest in the stock market as a whole. There are plenty of good reasons to do so. It always goes up (so far) and bad performers are automatically out.

If you don’t have a trading account yet, you’re faced with the problem of how to start. You either give your money to an investment house, company or bank to put it for you in the market through their Mutual Fund, or you put it in the market directly.

In both cases you buy a portion of the fund. The main difference between the mutual fund and the ETF (exchange traded fund) is their commission: the mutual fund is smaller than the ETF so the commissions the company must make to cover expenses and profit will impact the fund in a larger percentage than the ETF.

The underlying assets are basically the same, so the expected return on both funds should be the same, but after commissions you will be left with less in the mutual fund.

Whether your plan is to buy it, forget it and let the market do the rest, or actively manage your position by buying and selling your holding of the fund from time to time, an ETF is the best course of action.

OwnSovereign

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